European class actions hit record high

European risk and insurance managers need to prepare for rising levels of class actions as the Representative Actions Directive (RAD) is implemented across the European Union, warns international law firm CMS.

The directive was published in the official journal in December 2020. Member states had 24 months to adjust domestic law then a further six months to bring such amendments into force.

CMS’s latest research found class actions reached a new peak in 2023, with 133 class action claims filed across Europe, the highest number to date. Last year saw ‘opt-out’ class actions outnumber ‘opt-in’ class actions for the first time in Europe.

The 133 claims filed represent a 10% increase from 2022 and a “staggering” 93% increase since 2019, before the long-debated RAD came into force.

The UK remains the highest-risk jurisdiction for class actions in Europe. The total claimed value of class actions in the UK – opt-in and opt-out – were in the region of €145bn last year.

Portugal’s class action claims, amounting to €45.85bn, surpassed those in the Netherlands of €35.33bn in 2023. In Portugal, actions seeking monetary payment increased six-fold compared to 2022, reports CMS.

Kenny Henderson, partner at CMS, said: “The surge in class action claims across Europe reflects an increasingly complex legal landscape. It is extraordinary that competition class actions encompassing more than 540 million class members have been brought in the UK, with most of the growth in just the last three years.

“This translates to more than 8.1 actions for each person in the UK. The numbers are so other-worldly because these people are brought into these opt-out US class actions without being asked and usually without their knowledge. Equally astronomical are the sums involved. In the period 2018-2023, €145bn of damages were sought – a level of damages that continues to increase year on year.”

The CMS report also reveals the deep spread of claims across Europe. While England and Wales remained the highest-risk European jurisdiction, accounting for 29% of all claims, Portugal (23%) and the Netherlands (18%) closely followed. Germany (8%), Poland (6%) and Italy (4%) were also more active in 2023.

This is a stark contrast to 2020, when 63% of claims were filed in England and Wales. The implementation of the RAD, aimed at facilitating collective redress for mass consumer claims, has been a “pivotal” development, taking effect in Portugal, Netherlands and most EU states, concluded CMS.

Dr Zsolt Okányi, CMS’s global head of dispute resolution, said: “While the UK continues to lead in terms of risk, the rapid rise in claims in Portugal and the Netherlands signals a broader trend. The increased availability of litigation funding and advancements in technology have facilitated the pursuit of mass claims and made it easier for claimants to organise and file actions. The implementation of RAD is also proving significant, providing a mechanism for collective redress and empowering consumers and public bodies across Europe to take action against more corporations.”